Macroeconomic fundamentals improved but need to be vigilant: Raghuram Rajan

Reserve Bank of India Governor Raghuram Rajan has said macroeconomic fundamentals of the country have improved over the past two years and emerging market economies like India are better placed to face any eventuality.

But on the other hand, he cautioned against more volatility, given conflicting action by the developed world.

After the “taper tantrums” starting mid-May 2013, when the Fed hinted at reversing its easy money policy, “a combination of global factors and concerted domestic policy decisions” have helped the country, Rajan said in the foreword to the Financial Stability Report 2015 (FSR) released by RBI today.

“The macro-economic fundamentals have improved and we have also been able to build buffers to fight any future uncertainty,” he said, stressing that “we need to be vigilant”.

“With back-to-back quantitative easing by other major central banks, alongside the possible tightening by the Fed, what we have seen might be only one of a series of such ‘tantrums’ that the global markets are likely to witness.”

Rajan has repeatedly called for policy co-ordination at global forums, saying policies in the developed world driven by domestic needs can adversely impact other developing countries in an inter-connected world.

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